Monday, October 25, 2010

TIPS Auction Sells at a Negative Yield

As Ben continues to remain infatuated with deflation, the bond market is taking the other side of the trade.

The TIPS auction today saw huge demand as bond traders pile into these bonds which are securities that are designed to reflect changes in the CPI order to protect you from inflation.

The bond market obviously is becoming increasingly concerned that Bennies upcoming QE2 will result in crippling inflation.

CNBC reported that this was the first TIPS auction that closed with a negative yield although I have not been able to confirm this.

Nevertheless, at a bid to cover of almost 3-1, there was plenty of demand.

As the dollar falls yet again today it appears that the risk of the US currency turning into piece of toilet paper is rapidly increasing.

Here were the TIPS results:

"October 25, 2010 202-504-3550


Term and Type of Security 4-Year 6-Month TIPS

CUSIP Number 912828MY3

Series K-2015

Interest Rate 0-1/2%

High Yield1 -0.550%

Allotted at High 57.82%

Adjusted Price 105.508607

Unadjusted Price2 104.749175

Adjusted Accrued Interest per $1,000 $0.19370

Unadjusted Accrued Interest per $1,0002 $0.19231

TIIN Conversion Factor per $1,0003 1.153603720

Median Yield4 -0.635%

Low Yield5 -0.750%

Issue Date October 29, 2010

Maturity Date April 15, 2015

Original Issue Date April 30, 2010

Dated Date October 15, 2010

Tendered Accepted

Competitive $28,356,500,000 $9,920,189,600

Noncompetitive $79,810,900 $79,810,900

FIMA (Noncompetitive) $0 $0

Subtotal6 $28,436,310,900 $10,000,000,5007

SOMA $0 $0

Total $28,436,310,900 $10,000,000,500

Tendered Accepted

Primary Dealer8 $19,980,000,000 $5,700,782,000

Direct Bidder9 $1,793,000,000 $313,500,000

Indirect Bidder10 $6,583,500,000 $3,905,907,600

Total Competitive $28,356,500,000 $9,920,189,600"
Keep it up Bernanke!  The bond market is calling your bluff:

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